Ma Bell's Kids Will Live On The Net

Ma Bell's Kids Will Live On The Net

February 28, 2005

By Steven Levy

We're seeing the phone call turn into just another Internet tool, like e-mail or instant messaging.

Have telephone companies gone off the hook? In the last few weeks, AT&T has been gobbled by SBC and MCI snapped up by Verizon. It's like some toddler upchucked his alphabet soup.
Part of this ferment comes from the telco struggle to deal with new technologies, but the most disruptive change of all—voice over Internet protocol (VoIP), pronounced by geeks as "v-oy-p"—is only beginning to make its mark. "Telephone service used to be based on a huge infrastructure of high-priced equipment," says Peter Sisson, a former Bell Labs researcher turned entrepreneur. "And now it's just software."

Think about that. All those costly switching stations and all those miles of wire and fiber optic trumped by the ability to plug your telephone into the Internet, where voice is as easily transmitted as e-mail, iTunes songs and pictures of Teri Hatcher. That's why a company called Vonage can sell 400,000 subscribers unlimited long distance service for $25 a month, simply by letting them plug their phones into broadband Internet instead of phone jacks. And that's certainly why the Swedish mavericks who created the Kazaa file-sharing service could use the same kind of digital bucket-brigade-style model to come up with an Internet peer-to-peer-based phone service called Skype.

More than 25 million people talk to each other free, from anywhere in the world, on Skype, a number that grows by 140,000 a day. Businesses are using it for conferencing and friends separated by thousands of miles keep a line open to each other all day. At that price, why not?

What's more, with the pervasiveness of wireless Internet connections, you can use services like Skype pretty much anywhere, without worrying about your allotment of roaming minutes. Vonage, in fact, has just announced a $100 Wi-Fi phone. Just sit at the Starbucks and gab with your buddies in Brazil.

The next step comes from Teleo, a company formed by the aforementioned Sisson and publicly announced last week.

Directed toward the "mobile professional" (a big market, since nobody who's stationary will ever admit it), Teleo is something like Vonage, in that it can replace traditional long-distance service by letting you plug a telephone into the USB port of your computer and call all over the world, for a flat two cents a minute. It's also something like Skype, because it's a peer-to-peer system where the calls you make and receive from others on the Internet are free.

Teleo also claims a more effective means of making itself available to those using the Net behind corporate firewalls. But its most interesting advance is a frank treatment of Voip as just another digital tool like e-mail or instant messaging. It blends phone calls into your software applications.

For instance, you can specify that calls directed to your Teleo phone number ring your computer, your mobile phone or your voicemail. If the latter, the messages can appear in your Microsoft Outlook in box as e-mail. Also, when you're surfing the Internet, Teleo recognizes when phone numbers appear on Web pages. A single "click-to-call" on the number, and you're connected by voice. The cost for this is $4.95 a month, less money than the taxes most of us spend on our regular phone service.

I mention taxes because right now all sorts of strange tariffs and fees are slapped onto your phone bills. It comes along with the byzantine regulatory structure of the phone system, a construct that has increasingly drifted from the technological reality of the 21st century. Sisson predicts that as Internet calling prevails, "innovation and competition [will drive] prices down to nil." But others fear that regulators—spurred by states that want to keep collecting taxes and lobbyists from the current telephony giants—will inevitably set their sights on VoIP. Another fear is that telco's selling broadband will block the new services, a charge recently leveled by Vonage toward an unnamed provider.

Maybe I'm just overly eager to see my voicemail relegated to my e-mail in box, but my guess is that regulators or not, the Voip revolution is inevitable. If AT&T can hang up, anything is possible.